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John from Moneycorp

Major currencies – key points this week

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Hi all

 

I know this might not be directly relevant to some members, however please see a brief summary below of the major global currencies (I have received some requests for this type of information).

 

AUD: The weak US payrolls number hit every commodity-related currency hard because, as legend has it, if America sneezes the global economy catches a cold. That has not prevented the Aussie from hitting a record high against the pound and coming close to its all-time high against the dollar but it might be a sign that an end to the one-way street is in sight.

 

USD: If President Obama and the house of representatives cannot reach agreement on the budget and the debt ceiling the United states government will run out of money on 2 August. Few believe it will come to that but the possibility makes investors nervous about the dollar. Last week's horrendously soft payrolls number is another reason for their dislike.

 

NZD: New Zealand's products are mainly meat and dairy, exports which unlikely to be compromised in any major way by the possible fall in demand for minerals and metals. In the last week the Kiwi has scored record highs against the US dollar, the euro and the pound. It might have further to go.

 

CAD: Canada's economy is closely aligned to that of the United States and to global demand for oil, of which it is a major exporter. With the US economy stuttering and the risk of a financial crisis in Europe dampening global risk-appetite the Loonie is fighting on two fronts.

 

ZAR: While the rand is vulnerable to any reduction in demand for commodities, one of its products - gold - is as popular today as it ever has been. On top of that South Africa's 5.5% benchmark interest rate comfortably outweighs its 4.6% inflation rate, a situation that no European or North American currency can match.

 

EUR: The failure of EU ministers to come up with a comprehensive and permanent solution to the Greek debt crisis is turning into a disaster for the euro. The longer they fail to sort it out, the worse investors fear the problem will become. Italy has now joined Greece, Ireland, Portugal and Spain on the list of government bonds that investors least like to own. As a result the euro has lost ground and is likely to lose more.

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Latest update/review is below.

 

AUD: First foreign investors and now local analysts have come to the conclusion that Australian interest rates have peaked. The new outlook foresees the cash rate falling by one percentage point to 3.75% by the end of next year. If that view persists it will weigh on the dollar.

 

USD: The Democratic administration and the Tea-Party Republican congress have a fortnight to sort out an increase in the $14.3 trillion debt ceiling before the government runs out of money and American Treasury bonds lose their AAA credit rating. Most expect them to reach that agreement but everybody fears for the consequences if they do not.

 

NZD: New Zealand's economy grew by 0.8% in the first quarter of the year, nearly three times as much as the market had been expecting. Although the Reserve Bank is unlikely to react quickly to the data it is probable that interest rates will start to go up again before the end of the year. The development could mean new record highs for the Kiwi.

 

CAD: Investors seen unsure what to do with the Canadian currency at the moment. Sometimes they see it as a clone of the US dollar, sometimes as an alternative to it. For two weeks it has been hanging round with the British pound for no particular reason.

 

ZAR: The debt crises in Europe and the States have made investors nervous of commodity-related currencies including the rand and the Australian dollar. The rand has the extra handicap of strikes in the manufacturing and energy sectors and it was the worst-performing currency last week.

 

EUR: EU leaders have scheduled another summit meeting for this week, again with the intention of reaching a workable solution to the debt crisis in southern Euroland to satisfy everyone. Investors know that is impossible so they are worrying how much of a lash-up the eventual compromise will turn out to be and how long it will take to arrive.

 

GBP: In a rare break from form, instead of snatching defeat from the jaws of victory sterling has taken advantage of the discomfort of the US dollar and the euro. Although it is not the market's favourite currency investors are prepared to tolerate it in the absence of any better alternative.

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This week’s brief weekly updates are below, thanks.

 

AUD: The minutes of the Reserve Bank of Australia's last policy meeting suggested that it is still prepared to respond to high inflation by raising interest rates but investors are not convinced. CPI data this week are expected to show a small uptick inflation to 3.4%, nowhere near enough to engender any panic rate hike from the RBA.

 

USD: The White House and Congress have still not reached an accord on the budget and increasing the debt ceiling. Investors are beginning to worry that this brinkmanship really could lead to the loss of America's AAA credit rating. Were that to happen, the dollar would almost certainly take a serious hit.

 

 

NZD: With a 2.5% benchmark interest rate, strong demand for the country's meat and dairy exports and half a globe's-worth of separation from the debt crises in Europe and Washington the New Zealand dollar remains in demand. It has scored new record highs against the pound and the US dollar. Overvalued though it almost certainly is, it could go even higher.

 

 

CAD: Although the Bank of Canada says it is minded to raise interest rates, last week's inflation data gave it no pressing need to do so. Inflation slowed from 3.7% to 3.1% in June with the core rate down from 1.8% to 1.3%. The Canadian dollar would also be more vulnerable than most currencies to a downgrade of America's credit rating.

 

 

ZAR: The South African Reserve Bank kept its benchmark interest rate steady at 5.5% despite an uptick in inflation to 5%. That attitude might change if, as expected, inflation carries on above 6% but that is unlikely to happen until the end of the year. In the meantime the GBP/ZAR exchange rate seems to heading back to the region it occupied during most of June.

 

 

EUR: At a summit meeting last Thursday Euroland leaders agreed on a plan to provide Greece with a second bailout and to prevent the further spread of contagion that has pushed up borrowing costs for southern Europe. That's what they said, anyway, but only the most sketchy details have emerged. Not until investors see and believe the whole scheme will their trust in the euro return.

 

 

GBP: With few economic data to help or hinder, the pound was a midfield player last week, neither starring nor stalling. Its next obstacle will be the figures for second quarter economic growth, due this week. Quarterly expansion of 0.2% is predicted; the risk is that a sub-zero number could cause serious damage to sterling.

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Hi all, latest update is below.

 

AUD: Although Australian inflation has accelerated to 3.6% analysts are still divided about whether or not this means higher interest rates from the RBA. At the policy meeting this week no change is expected but the statement, assuming it includes guidance for the future, will be important.

USD: With a shabby compromise on the budget and debt ceiling America is now lumbered with $1.5 trillion of spending cuts that will make a mockery of the last three years' stimulus. It does not look good, especially after figures showing very weak growth in the first half of the year.

NZD: More record highs for the Kiwi as investors continue to fall for its long-distance separation from debt crises and its steady export market for meat and dairy products. It is overvalued but that does not mean it is about to fall.

CAD: Too close to the United States and not performing as expected. The Loonie was caned last week when weak US growth data coincided with a negative performance by Canada itself in May. Friday's employment numbers will be critical.

ZAR: Along with the Australian and New Zealand dollars the rand derived benefit from investors' disenchantment with mainstream currencies. Its 5.5% benchmark interest rate helped too. But unemployment is rising and growth later this year is likely to slow.

EUR: A downgrade for Cyprus - and the possible need for a bailout there - and the threat of a downgrade for Spain provided reminders that the debt crisis in Euroland is not yet solved and the euro is not out of the wood.

GBP: Britain's AAA credit rating and the absence of a UK debt crisis worked in sterling's favour last week for once. The honeymoon might not last but at least there is some light at the end of the tunnel.

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The latest currency updates are below

 

AUD: Through no fault of its own (other than being overvalued) the Australian dollar bore the brunt of the flight from risk last week, losing 12.2% to the top-performing Swiss franc. As long as investors are in bunker-and-sandbag mode it is hard to see what will encourage them to restock with the Aussie dollar. A 4.75% annual interest rate counts for little if you can lose twice that much and more in seven days.

USD: The more investors heard about the ill-starred and even more ill-fated US budget "agreement", the less they like the sound of it. Neither side has an incentive to give ground ahead of the star-committee discussions and both are becoming even more deeply entrenched in their obduracy. The real risk is that America will end up with broad and arbitrary cuts across the whole gamut of government spending. Babies and bathwater spring to mind, as does selling the dollar in the wake of the S&P credit downgrade.

NZD: The Kiwi still looks good against the ailing US dollar but less sparkling against the pound, where it is 6% off its record high. The NZ dollar was dragged down by association with the other commodity currencies - notably the AUD, the week's worst performer - as a result of the debt crises in Euroland and America. If those crises dent global growth the commodity currencies will suffer. Never mind that NZ exports food, not rocks; it is vulnerable because it has risen too far.

CAD: Canada is still a top-grade AAA credit risk where, according to at least one agency, the United States isn't. Were it only for that distinction the Loonie might have done better last week. However, the Canadian dollar is associated with commodity exports, demand for which would fall in the case of a global economic setback. In particular it is an oil exporter and the oil price has fallen by 14% in a week.

ZAR: The rand was not the worst performing currency by any means last week. The Australian, New Zealand and Canadian dollars did worse. But it was firmly down in the third division as a result of investors' worries that the debt crises in Euroland and America will have a negative impact on global growth. South Africa itself did nothing wrong other than deliver slightly below-par indicators for industrial activity. Even so, sentiment is in charge of its fate and that sentiment is not positive.

EUR: As each day has passed since the breakthrough summit meeting in Brussels two and a half weeks ago, investors have become steadily more jaundiced about the prospect of it being any more fruitful than its several predecessors. The ECB is buying Spanish and Italian bonds because it has little alternative, not because it believes the tactic will work. There is more nervousness in store for the euro.

GBP: Investors have started talking about the pound as a safe-haven currency. Ludicrous as that concept might be (and it is), the pound was the second-best performer last week, well behind the Swiss franc but in step with the yen and ahead of the rest of the field. Still, sterling is by far the most heavily-traded currency with an undisputed AAA credit rating. It might be able to hang in there. Stranger things have happened.

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The latest currency updates are below.

AUD: Having fallen to the bottom of the currency heap in the previous seven days the Australian dollar topped last week's ladder, rising by an impressive - and surprising - 5.3% against the pound. Other than the Aussie's 4.75% benchmark interest rate there was not a lot to justify its resurgence. Specifically, among a handful of low-importance data the employment numbers stood out as a sea of red. Employment was flat and unemployment rose from 4.9% to 5.1%. But never mind; 4.75% is pretty good.

USD: Unlike the media and the politicians, investors could not care less about Standard & Poor's downgrade of America's credit rating from AAA to AA+. With equity markets flying around last week they were entirely happy to pile into Treasury bills and bonds and making the US dollar the world's fourth-best-performing major currency. That relaxation might not survive the week if share prices retain their composure but it does prove that not everyone hangs on every last word of the ratings agencies.

NZD: The Kiwi could not keep up with its northwesterly neighbour but still managed to outperform all but two of the major currencies. It had a rough ride though, rising by six cents one day and plunging by ten the next. There was no obvious connection between the NZ dollar's gyrations and the state of the NZ economy. If anything, the downgrade of global economic expectations pushes a correction of the "emergency" NZ rate cut in March further into the future. Don't worry though; the strengthening NZ dollar was not the only bit of illogicality last week.

CAD: The Loonie came unstuck more by accident than by default last week. One day it was damned by its association with the US dollar, the next it was dumped because of its separation from the States. The Canadian economy had little to do with the proceedings and the fluctuating price of oil was only a minor factor. Economic data should have more bearing on the issue this week, when the Canadian inflation figures come out on Friday.

ZAR: While the Australian and New Zealand "commodity" dollar strengthened last week the rand fell almost to the bottom of the pile. The threat of a strike by South African council workers, who want an 18% pay rise, did not help and the economic statistics got in the way too. Business confidence was down, mining production fell in the year to June and manufacturing production grew more slowly. Even so, the turbulence in financial markets was at least as much to blame for the rand's underperformance as were the ecostats.

EUR: The European Central Bank's purchases of Spanish and Italian bonds were effective in pushing down those governments' borrowing costs (if only temporarily) but now France is in the frame as well. Media reports that a large French bank was in trouble and that France itself was in line for a downgrade of its credit rating provoked another minor downturn for all things Euroland. The latest hot topic is the possibility of multi-government pan-euro-zone bond issues. Germany says no but the idea might just fly and investors like it.

GBP: The idea of the pound as a safe-haven currency ran out of steam as quickly as it had emerged. Investors have not been put off the US dollar by a downgrade of its credit rating and they demonstrated their continued confidence by preferring it to sterling last week. The pound did itself no favours, with disappointing figures for industrial and manufacturing production as well as a widening of the trade deficit, but it was sentiment, not logic, that held it back.

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The latest updates are below, thanks

 

AUD: Following the EU summit's failure to create a magic bullet for its southern debt crisis (and its bizarre proposal for a tax on financial transactions), bank shares fell out of bed once again and dragged down share prices. Global economic growth is in jeopardy and, with it, the currencies that have most to gain or lose from that growth. The Aussie dollar did nothing wrong but suffered as the result of a serious loss of risk-appetite among investors.

 

USD: Economic growth (or the lack of it) and quantitative easing (or the possibility of it) are holding the dollar down. Last week's most startling ecostat was a 34-point plunge in the Philadelphia Fed's manufacturing index to -30.7, within ten points of a 15-year low. Equally worrying is the chance that the Federal Reserve may announce a third round of quantitative easing on Friday. It probably won't, but the possibility acts as a mud-weight on the dollar.

 

NZD: The New Zealand dollar ended up as tail-end Charlie in a strange week that saw record prices for gold at the same time as sterling topped the currency ladder. The NZ dollar fell foul of the same system that took it to record highs just a fortnight ago. As a small but sometimes very popular fish in a very large pond, when in demand it is hauled to the surface; when nobody wants it the Kiwi sinks to the bottom.

 

CAD: Sometimes the Canadian dollar follows the other commodity-oriented currencies or the price of oil; sometimes it sticks with the US dollar. Last week, with no other inspiration to offer, it followed the Greenback. That was something of a mixed blessing, given the US dollar's lacklustre performance, but it could have been worse. The Loonie did not come last but its performance was of Vauxhall Conference, not premiership, calibre.

 

ZAR: The rand did not come bottom of last week's rankings - that dishonour belonged to the New Zealand dollar - but it was in penultimate place. Analysts are looking for an increase in inflation and a slowdown in growth in South Africa. Add to that the last week's plunge in investor confidence and it was not a great surprise that the rand suffered more than most of the commodity-exporting currencies (despite the record high price for gold).

 

EUR: The wonder is not that the euro did so badly last week but that it did not do worse. A Franco-German summit came up with nothing more than a plan to tax financial transactions, sending bank shares into a tailspin and dragging down global equity markets. Second quarter economic growth in Euroland fell short not only of expectations, but also of the feeble performance exhibited by Britain. The German locomotive is running out of steam.

 

GBP: A week ago it seemed that the notion of the pound as a safe-haven currency was a busted flush. After topping the league table in the last seven days the idea seems less crazy. With nothing in the economic data to drive it forward (higher unemployment, flat retail sales), no other argument springs to mind. A safe-haven pound still sounds like a crew-member for the ship of fools but it might just float, given the shortcomings of the opposition

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I really appreciate these postings, reading them over a few weeks, give me a complete amateur, insight into the world currencies, and it's always written in plain and amusing Ozglish!

Cal


Job offer April 2011, Reccie July 2011, 457 submitted 21/09/2011, my medical only 14/10/11, medical submitted 21/10/11 (IT issues), referred 21/10/11, approved 27/10/11, landed 24/4/12, PR submitted (decision ready) June 2012, PR granted August 2013

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Hi everyone, the latest updates are below – thanks.

AUD: The Aussie came second in last week's league table not because of any intrinsic qualities but because it offers a 4.75% interest rate and the financial market panic of the previous fortnight had subsided. The Australian housing market still seems to be under pressure, with July bringing an -8% monthly fall in new home sales and a -15% annual drop in building permits. The Aussie did well last week but not for the right reasons.

USD: Fed Chairman Bernanke failed to announce the expected third round of quantitative easing last Friday but did not rule it out for later this month. However, few investors are in any doubt that the authorities would be content to see the dollar weaken further, QE or not QE. The US economy grew more quickly than Britain and Euroland in the second quarter but not by much. Economists argue that it is unreasonably cheap; that does not mean it will go up in the immediate future.

NZD: From zero to hero the NZ dollar leapt from the bottom of the pile to the top last week. It was all to do with the passing of the two-week panic and a revitalisation of investors' appetite for risk. It helped the Kiwi that New Zealand's trade surplus widened unexpectedly and that building permits leapt by 13% in July while in Australia they went down.

CAD: The Loonie might have done better had it not been held back by the US dollar, which spent the week waiting for the possible announcement of another round of quantitative easing ("printing money") by America's Federal Reserve. Although there was no such announcement last week there could be one within a month. If America starts printing money again it will not sit comfortable with the Canadian dollar.

EUR: August gave some respite to the beleaguered euro. Not only was everyone on holiday, the financial market panic in the middle of the month was a distraction from the lack of cohesion in Brussels. The southern Europe debt crisis is still there and without the intervention of the European Central Bank in the last month it might have been a different story. As we move into September, expect thing to worm up again.

GBP: Ridiculous though the notion may be, it is still possible that investors are treating the pound as a safe-haven currency. In the last week it was one of four tail-enders, along with the yen, the US dollar and the Swiss franc, while the antipodean dollars and the South African rand led the field. Improved investor confidence and a weaker pound, when the data provided no excuse for its punishment, make at least a modest case for its preferment.

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Hi everyone, the latest currency updates are below – thanks.

AUD: The Australian dollar was playing the triple-A credit rating card last week, not the commodity card. The currency is not big enough to mix it with the big boys, so could not keep pace with the US dollar or the yen, but it gave sterling a run for its money. It did so despite a further slowdown in the construction sector and a poor employment figure; employment went down by ten thousand in August when it should have risen by that number.

USD: A growing suspicion among investors that Greece would be allowed to default led to an increase in the pace of the exodus from the euro last week. Contributory factors included the resignation of Jürgen Stark from the European Central Bank Executive Board and noises from Berlin suggesting that Chancellor Merkel was preparing the country's banks for a default by Greece. Although default is not yet a done deal, the clouds over Athens are getting darker.

NZD: As investors fled from the wobbling euro some of their money found its way into the NZ dollar but only sufficient to keep the Kiwi one rank ahead of what remains, for the moment, the single European currency. The few NZ ecostats did the dollar no favours. Construction was a particular disappointment, with activity in the sector during the second quarter at less than half the level of the same period three years ago.

CAD: Even though the Loonie could not keep up with the US dollar it did benefit from a general desire among investors to get as far away as possible from the euro zone. It helped its case with an unexpected 12-point improvement in the Ivey purchasing managers' index and a healthy 6.3% monthly rise in building permits while managing to dodge the disappointing loss of 5,500 Canadian jobs in August

EUR: The talk on the street is no longer about what the EU will do about the southern debt problem. Now it is about whether Greece will default this week or next. There are growing signs that Germany is preparing to bail out of the bailout, not least the resignation of Germany's last remaining ECB executive board member, Jürgen Stark. Nobody knows what will happen in Greece does default but they know it will be ugly.

GBP: The failure of the Bank of England to roll out another round of quantitative easing on Thursday sparked a relief rally for the pound. Sterling was left behind by the North American dollars and the yen but made the most of its AAA credit credentials in another week during which risk was more important than return. The few UK economic data were second-division indicators and had minimal impact on the currency.

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Hi everyone, please see the latest updates below – thanks.

 

AUD: Nervousness about global growth hurt all three of the commodity-oriented dollars and the Aussie was fortunate to take the least damaging blows. It even managed to outperform the benighted euro, though not through any intrinsic economic qualities. A 1.1% monthly increase for new home sales did little to offset the -16.2% fall in the preceding three months. More worrying was a further decline in the AiG manufacturing index, which showed a worsening slowdown in activity.

 

USD: The US dollar missed out on another win-win week but it, alongside the Swiss franc, was not far behind sterling. The main handicap for the dollar was the expectation of a positive outcome when the German parliament voted on the country's support for the second bailout of Greece. After that vote went through as expected investors were left with nothing to look forward to and they drifted back towards the US currency.

 

NZD: As well as the negative sentiment surrounding the world economy, New Zealand also had to cope with a downgrade of its credit rating from AA+ to AA by two of the big three agencies. The unwelcome news added to the downward pressure on the Kiwi. It is now more than -8% of its early-August high against sterling and a further retreat is easy enough to imagine if current technical obstacles can be overcome.

 

CAD: Among the trio of "commodity" dollars it was the Loonie that fared least well, although it was not far behind the NZ dollar and the Japanese yen. There was no compelling reason for its underperformance other than a vague sense that the Bank of Canada might be inclined to lower its benchmark interest rate when the policy committee meets in three weeks' time. Nevertheless, it lost -1.7% to the pound and a significant -5.1% to the US dollar.

 

EUR: The good news for the euro was the German Bundestag's vote to support the second Greek bailout. The bad news came two days later with an announcement that Greece would miss its target of reducing its budget deficit to 6.5% of GDP next year. In theory that means Greece will not be allowed to receive any more bailout money. In practise it just means that EU leaders will have to come up with a plausible reason why that will not happen. Either way, it is not a positive development for the euro.

 

GBP: Sterling had a good week. Mixed news on UK house prices was offset by the highest monthly number of mortgage approvals since January last year. Gfk's index of consumer confidence showed a small but welcome and unexpected improvement to a still-negative -30 in September. Despite the media clamour, analysts do not expect the Bank of England to reactivate its asset purchase "money printing" at this week's policy meeting.

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Hi all - the latest currency update is below - thanks.

 

AUD: The commodity- and energy-related currencies were at the upper end of the scale for the same reason the US dollar was close to the bottom. The prospect of a resolution to the European debt crisis created a more upbeat market view, dispelling - at least for the moment - the prospect of a Euroland blow-up and a global recession. If recovery looks more assured, China will want more of Australia's ore and coal exports.

 

GBP: The pound kept company with the safe-haven dollar, yen and franc not because of its AAA credit rating but because investors suspected the Bank of England might embark on another round of quantitative easing. Sure enough, on Thursday the Bank did exactly that, announcing another £75bn of asset sales. The news was temporarily bad for the pound but seemed to have done no long-lasting damage.

 

NZD: Rugby-related beer sales are contributing to the NZ economy but the world cup has also displaced some of the usual economic activity. The effect of the Canterbury earthquake has at last become positive though. The rebuilding effort has driven business optimism in the area to the highest level in the whole country. On a broader front, business sentiment was muted in the three months to September although firms seemed to be more worried about the general outlook than they were about their own particular business.

 

USD: Upbeat sentiment among investors carried through the weekend, spoiling their appetite for the safe-haven US dollar and Japanese yen, which were the week's worst performers. A stronger than expected US employment report was also, perversely, negative for the Greenback. The argument there was that a stronger US economy points to a stronger world economy. That meant less reason to stock up with low-risk assets such as the dollar.

 

EUR: It was an above-average week for agreements to solve the southern European debt crisis. Two of them emerged; one between EU finance ministers to continue lending money to Greece and one between President Sarkozy and Chancellor Merkel to recapitalise European banks. No details were revealed, of course, but this time investors think they might really be serious about solving the problem. The European Central Bank helped things along with a promise to lend unlimited amounts of money to Euroland commercial banks.

 

CAD: Improved investor optimism was as helpful to the Loonie as it was to the antipodean dollars. A steep -10.4% monthly fall in Canadian building permits was only a temporary hindrance. Otherwise the economic data were robust. The Ivey purchasing managers' index bucked the global downward trend with a six-point improvement to 63.4 in September. There was good news on the employment front too. A net 60.9k jobs were created in September, three time as many as expected.

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The Biggest Market Headfake Ever: Is A Wholesale French Bank Liquidity Run The Sole Reason For The Euro, And S&P, Surge?

http://www.zerohedge.com/news/biggest-market-headfake-ever-wholesale-french-bank-liquidity-run-sole-reason-euro-and-sp-surge

 

Over the past two weeks, there is one simple thing that has been bugging skeptical macro observers: namely the paradox of i) just how ugly the European funding and liquidity situations have gotten, on the one hand, confirmed by the blow out in French bond yields (the French-Bund 10 year spread just hit an all time record yesterday) as well as continuing deterioration in credit spreads across core European nations, yet, on the other, ii) the euro, especially in that critical pair the EURUSD, has seen one of its most explosive rises in recent history, which as Zero Hedge pointed out yesterday, has totally decorrelated with the French-Bund spread, to which it had been firmly 'pegged' previously. As a result of ii), equity markets have surged due to legacy correlation arbs, which see Euro strength, and hence dollar weakness, as an empirical signal of equity "cheapness", which in turn leads all algos to treat a rise in the EURUSD as a buying signal. So how is it that even with the interbank liquidity situation in Europe frozen and getting worse, further keeping in mind that European banks are now expected to (or have already commenced - see yesterday's move in PrimeX) engage in widespread asset liquidations, that broad market risk is perceived as cheap? Simple. As the following note by Deutsche Bank's Alan Ruskin explains, the sole reason for the EUR (and hence S&P and global 100% correlated equity risk) surge in the past 9 days is not driven by any latent "optimism" that Europe will fix itself, but simply due to the previously discussed wholesale asset liquidations (as none other than the FT already noted), which on the margin are explicitly EUR positive due to FX repatriation, courtesy of the post-sale conversion of USDs to EURs. Which means that the ever so gullible equity market has just experienced one of the biggest headfakes in history, and has misinterpreted a pervasive European, though mostly French, scramble to procure liquidity at any cost by dumping various USD-denominated assets, as a risk on signal!

Use the following link if you want to read the entire article.....

http://www.zerohedge.com/news/biggest-market-headfake-ever-wholesale-french-bank-liquidity-run-sole-reason-euro-and-sp-surge

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Hi everyone – please find the latest currency updates below – thanks.

AUD: There was a similar feeling of déjà-vu among the "commodity" dollars. Fewer worries meant a greater appetite for the currencies of commodity exporters, especially for those offering an above-average rate of interest. Australia further improved the AUD's position with stronger than expected employment data, including a fall in the rate of unemployment to 5.2%. The overall effect put the Aussie in top place for the week.

GBP: Sterling spent another week in the company of those more famously safe-haven currencies, the US dollar and the yen. The pound dodged the potentially damaging effects of a 15-year high for unemployment but remained in the shadow of the euro. Although grouped at the bottom of the league with the USD and JPY, sterling outperformed both, pulled ahead in the euro's slipstream.

EUR: Europhoria supported the currency for another week. Investors' optimism paid off when it was confirmed that EU leaders will announce a full and final solution to the Euroland debt problem this coming weekend. Although only a broad-brush plan is expected, investors are confident that it will lead to concrete results. As long as that confidence survives the euro will remain buoyant.

USD: It was exactly the same story last week as it had been during the previous seven days. The European Union was preparing a real, concrete, workable plan to sort out its debt crisis, removing a major cause of concern for the global economy. That worry having been removed, investors did not feel the need for safety offered by the US dollar and the yen. For a second week the two safe-haven currencies wore the worst performers

NZD: The Kiwi was close to the top of the table, also driven mainly by renewed optimism about Euroland, but could not keep pace with the Aussie. Not only were there no convenient and helpfully strong statistics from the New Zealand economy, New Zealand's 2.5% benchmark interest rate looks anaemic alongside Australia's 4.75% equivalent. The NZ dollar did not do badly; it just fared less well.

CAD: Of the Commonwealth trio the Loonie came third. Perhaps it was held back by its 1% benchmark interest rate - the lowest of the bunch. Maybe it was the shortage of positive economic data. Either way, the Canadian dollar could not attract as much support as its South Pacific cousins. Canadian economic data were decent enough but not sufficiently so to generate upward traction.

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The Australian dollar has strengthened after it was reported in the Guardian newspaper that France and Germany were ready to boost the eurozone's rescue fund in a bid to address the public debt crisis.

 

The markets are very fragile currently, therefore any news is having an impact on currencies – in this case, the suggestion of a solution to the debt crisis sparked interest in the Australian dollar (making it strengthen).

 

Some positive data was also released which illustrated how the Australian economy will perform over the next few months – this also boosted the Aussie dollar.

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Hi all – please see the latest updates below – thanks.

AUD: Optimism for an EU debt solution - one which would prevent a return to negative economic growth - kept the Australian dollar afloat last week but was not strong enough to send it to the front of the class. Coming up this week are Australia's inflation data and an RBA interest rate decision. One will undoubtedly influence the other but there is no real expectation that AUD rates will head higher.

GBP: Investors reckon they know exactly where they stand with the Bank of England. Sterling interest rates are not going up. It was therefore with detachment that they greeted last week's news of 5.2% consumer price index inflation in the year to December, a level that matched the record high for the series three years ago. It was not the inflation numbers that kept sterling in the top quartile of major currencies last week, it was its unchallenged AAA credit rating.

EUR: Yet again it was the euro at the centre of attention for the entire week. There was an element of crisis fatigue to it though, with two summit meetings on the agenda; one last weekend and one this coming Wednesday. If, as analysts suspect, France bends to Germany's will it is possible - even likely - that a full and final plan to resolve southern Europe's debt crisis will be outlined this week. Any sign of a fudge, though, and the knives will be out for the euro.

NZD: It is a similar story for the NZ dollar, which pottered along in the wake of the Aussie, neither on the most-wanted list nor on the scrapheap. The RBNZ will have the opportunity on Tuesday to begin reversing the emergency interest rate cut it made in March after the Canterbury earthquake. The chances are loaded towards the central bank not seizing that chance. Preserving the economy is more important.

USD: As one of only two viable alternatives to the single European currency (the other being the Japanese yen) the US dollar depends for its success on investors' dislike of the euro. Over the last fortnight that dislike has been muted by the prospect - valid or not - of a solution to Club Med's debt problems. Expect the US dollar to remain in a holding pattern as long as there is hope that EU leaders will put aside their differences on Wednesday.

CAD: The Canadian dollar's fortunes were more closely tied to those of the US dollar last week than they were to its antipodean cousins. The core rate of inflation jumped from 1.9% to 2.2% but it is unlikely that this will be enough to persuade the Bank of Canada to increase its 1% interest rate target at this week's meeting. As above, the need to preserve the feeble economic recovery outweighs the threat of inflation in most central bankers' minds

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Hi everyone – please find the latest currency updates below – thanks

 

AUD: The Aussie has been all over the place in the last three months but has not gone very far. Against the pound it is unchanged from late August. It is looking twitchy though, partly because the Australian economy is looking less bomb-proof than it used to and because house prices are heading lower. Mainly, though, the Aussie slipping because investors worry what will happen if turmoil in Euroland reduces Chinese demand for Australia's coal and iron ore and for the currency itself.

GBP: Sterling remained in the middle of the field, keeping pace with the euro and the Swiss franc. It had to contend with a fall in the inflation rate from 5.2% to 5.0% and an increase in the unemployment rate from 8.1% to 8.3%, both traditionally signals to lighten holding of a currency. The governor of the Bank of England threw some red meat to the bears when he downgraded the forecast for economic growth and hinted there could be another tranche of asset purchases by the Bank once the current budget of £275bn has gone.

EUR: The appointment of unelected governments in Italy and Greece has failed to mollify investors. They might sympathise but have yet to be convinced that economists will make any better fist of sorting out those countries' debt problems than the politicians who went before. When Spain borrowed ten-year money through the sale of ten year bonds last week investors demanded a hefty 6.98% rate of interest. A year ago it would have been 4.72%. The euro needs major action from EU leaders: Instead it is being hung out to dry.

USD: the US dollar was the week's second-best performing currency behind the Japanese yen. The slow-motion train wreck in Euroland is giving investors ample opportunity to prepare for when something nasty happens to the euro. They are taking advantage of the opportunity by stocking up with yen and US dollars. The re-emergence of a deficit crisis in Washington might mean the loss of America's remaining two AAA credit ratings but investors seem unconcerned: triple-A or not, the Greenback is still seen as safer than the euro.

NZD: The New Zealand dollar was not the week's worst performer; that dubious accolade belonged to the South African rand. But it had another bad run. From its highs three months ago the Kiwi is down by 11% against the pound and by 15% against the US dollar. Like the AUD, the NZD is suffering from a lack of confidence that New Zealand's economy would come through the threatened euro zone firestorm unscathed. Investors can only guess how demand for the Kiwi would be affected but they are guessing it would not go up.

CAD: The Canadian dollar had more affinity with the US one than with its antipodean cousins. It was the week's third strongest performer behind the Greenback and the Japanese yen. The economic data helped its case. Canadian manufacturing sales went up by double the proportion analysts had forecast in September. The leading indicator, an amalgam of employment, building permits, stock prices and other forward-looking statistics, also came in twice as strong as expected, albeit only with a 0.2% increase instead of the forecast 0.1%.

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